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Elon Musk offered to buy Twitter outright last week for $43 billion, which Twitter's board is resisting.
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After the friendly takeover route proved unsuccessful, Musk is now attempting a hostile takeover.
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Musk appears to be attempting a "tender offer," which is a direct appeal to shareholders.
During the first few months of 2022, billionaire Tesla CEO Elon Musk quietly spent over $2.6 billion buying up Twitter stock.
As a result, he now owns over 9% of the company's stock — and now he's vying for the other 91% as well. Last week, in a letter to Twitter's board chairman, he offered up another $43 billion for the remaining shares.
Twitter's board, however, had other plans: In a filing with the US Securities and Exchange Commission, the board embraced a so-called "poison pill" defense, formally known as a "shareholder rights agreement."
The concept is used by public companies to avoid being acquired against their will, and it works by making the target company more expensive. The company issues new shares that are available to current shareholders, excluding Musk, that are worth double the price they cost.
The result is more discounted shares flood the market, thus diluting an acquirer's original stake.
Though Twitter has yet to formally respond to Musk's offer as of Friday, he said, the poison pill filing marked the official end of the "friendly" takeover process.
So, what is a "hostile takeover?"
Formally, hostile takeovers begin when negotiations break down between an acquirer (Musk, in this case) and a publicly held company's board of directors.
One recent example of a friendly takeover — albeit one that's still going through the regulatory approval process — is Microsoft's $69 billion acquisition of Activision. Microsoft worked directly with Activision leadership and its board of directors, which approved the terms of the deal before anything was officially announced.
In the case of Elon Musk and Twitter, the situation played out very differently.
After revealing a large stake in Twitter earlier this month, Musk was subsequently appointed to the board of directors — which he initially accepted before walking back that acceptance days later. A few days after that, Musk appealed to Twitter's current board with a $43 billion offer to buy the company.
Alongside the offer was a letter from Musk to Twitter's board chairman Bret Taylor, in which Musk declared the offer to be his "best and final" offer.
"I am not playing the back-and-forth game. I have moved straight to the end," Musk wrote in his letter to Taylor.